United States: Top 10 International Anti-Corruption Developments For November 2021

Designed for busy in-house counsel, compliance professionals, and anti-corruption lawyers, this newsletter summarizes some of the most important international anti-corruption law and case developments from the past month, with links to primary resources. This month we ask: What new recommendations does the Organisation for Economic Co-operation and Development's (OECD) Working Group on Bribery have for fighting foreign corruption? Why did a federal court dismiss Foreign Corrupt Practices Act (FCPA) charges against a Swiss money manager? What made 2021 a record year for FCPA tips to the U.S. Securities and Exchange Commission (SEC)? The answers to these questions and more are here in our November 2021 Top 10 list.

1. OECD Updates Recommendation for Combatting Foreign Bribery

On November 26, 2021, the OECD Council adopted the OECD Working Group on Bribery's 2021 Recommendation for Further Combating Bribery of Public Officials in International Business Transactions ("2021 Anti-Bribery Recommendation"). The 2021 Anti-Bribery Recommendation updates and expands on the 2009 Anti-Bribery Recommendation by addressing key issues that have emerged or significantly evolved in the global anti-corruption landscape over the past 12 years. Among other things, the 2021 Anti-Bribery Recommendation introduces new sections on the demand side of foreign bribery, sanctions and confiscation, and data protection (encouraging countries to ensure that data protection laws do not unduly impede international law enforcement cooperation or corporate compliance programs). The 2021 Anti-Bribery Recommendation broadens the scope of existing recommendations on investigations and enforcement, awareness raising and training, and public advantages, including public procurement. It also updates the Good Practice Guidance for companies on internal controls, ethics, and compliance programs or measures for preventing and detecting foreign bribery. In many ways, the 2021 Anti-Bribery Recommendation is a technical document, but at a high level it reflects the Working Group's views on current enforcement trends and compliance best practices and signals the OECD's continued commitment to supporting anti-corruption measures.

2. Federal District Court Dismisses FCPA and Money Laundering Charges Against Swiss Wealth Manager

On November 10, 2021, a judge in the Southern District of Texas granted a motion to dismiss FCPA and money laundering charges against Daisy Rafoi-Bleuler ("Rafoi"), a Swiss citizen and partner in a Swiss wealth management firm who allegedly helped a number of individuals launder bribes to officials of Venezuela's state-owned oil company, Petróleos de Venezuela, S.A. (PDVSA).[1] Rafoi allegedly created fake companies on behalf of Luis Carlos De Leon-Perez, Abraham Shiera, and Roberto Rincon (all of whom have pleaded guilty to related charges) and used those companies to set up bank accounts in Switzerland and elsewhere that were used to launder the bribery proceeds. Shiera and Rincon both owned U.S.-based companies that benefitted from the alleged bribery. With respect to the FCPA charge, the Superseding Indictment alleges that Rafoi was an "agent" of a "domestic concern" (i.e., Shiera's and Rincon's U.S.-based companies) within the meaning of 15 U.S.C. § 78dd-2, but charges her and another defendant, Nervis Gerardo Villalobos Cardenes, with conspiring to violate both the FCPA's domestic concern (15 U.S.C. § 78dd-2) and territorial jurisdiction (15 U.S.C. § 78dd-3) provisions.

The court held that, in order to establish jurisdiction over a non-U.S. citizen for acting as an agent of a domestic concern, the indictment must allege that the agent engaged in conduct "while the person is present in or where she has previously established ties to the United States." The court concluded that, because the indictment alleges no acts by the defendant committed in the United States, "no agency relationship is established in the United States by the alleged acts," and the FCPA count should be dismissed. In reaching this decision, the court relied heavily on—and extended—the Second Circuit's Hoskins decision, which held that non-U.S. persons acting outside of the United States cannot be charged with conspiring to violate the FCPA unless they were acting as the agent for a person within the scope of the Act. (See our August 2018 discussion of the Hoskins decision.) The court similarly held that the money laundering charges, which were premised on the FCPA violations, required proof that the defendant conducted part of the offense while the defendant was physically present in the United States. Given the lack of any such allegation, the court held that the money laundering charges also should be dismissed. Finally, the court held that the FCPA and money laundering statue were both unconstitutionally vague as applied to Rafoi.

The U.S. Department of Justice (DOJ) has announced its intention to appeal the Rafoi decision and has a fairly good chance of success. Although a defendant's actions taken while physically present in the United States can establish territorial jurisdiction under 15 U.S.C. § 78dd-3, this is a separate analysis from whether an individual was an agent of a domestic concern under 15 U.S.C. § 78dd-2. The Hoskins court also held that the existence of an agency relationship is a question for the jury to decide. Thus, if the Fifth Circuit follows the reasoning of Hoskins on conspiratorial liability (not a given, as discussed in our June 2019 Top 10) and agency, then the district court's dismissal of the dd-2 object of the FCPA conspiracy charge against Rafoi could be overturned. This reasoning could also lead to a reversal of the dismissal of the money laundering counts insofar as they are premised on a violation of the FCPA's domestic concern provision.

3. SEC Reports Surge in Whistleblower Tips and Awards

On November 15, 2021, SEC released its annual Report to Congress regarding its Whistleblower Program. According to the report, SEC received more than 12,200 tips in FY 2021, a 76% increase in tips from FY 2020, and the largest number of tips received in a single year to date. The jump in tips included a jump in FCPA allegations, which increased 24% from FY 2020. According to the report, SEC received tips from individuals in 99 foreign countries, every state in the United States, and the District of Columbia. SEC reported that it awarded approximately $565 million to 108 individuals in FY 2021, both the largest dollar amount and the largest number of individuals awarded in a single fiscal year, and more than in all prior fiscal years combined. SEC also reported processing more whistleblower award claims than in any other year of the program and issuing the largest number of Final Orders resolving claims, including both award and denial orders, than in any other year of the program. As always, the annual Whistleblower Report serves to remind companies to ensure that their reporting mechanisms, anti-retaliation policies, and investigation procedures are up-to-date and equipped to handle whistleblower reports.

4. Former Coal Executive Pleads Guilty to Egyptian Bribery Scheme

On November 17, 2021, Frederick Cushmore Jr., a former vice president and head of international sales at Pennsylvania-based Corsa Coal Corporation, pleaded guilty to one count of conspiracy to violate the FCPA for his role in a scheme to bribe Egyptian officials to secure business with an Egyptian state-owned and state-controlled entity.[2] According to the criminal Information, Cushmore and other company executives paid approximately $4.8 million in commissions to a third-party sales agent for the purpose of bribing officials from Al Nasr Company for Coke and Chemicals to obtain approximately $143 million in coal contracts between 2016 and 2020. Reflecting DOJ's continued concerns regarding ephemeral messaging systems (see, for example, our November 2019 discussion of DOJ's Corporate Enforcement Policy), the Information emphasizes the conspirators' use of encrypted messaging services, including WhatsApp, in furtherance of the alleged scheme. According to DOJ, Cushmore instructed one of his co-conspirators to "do more on this [i.e., WhatsApp] since it's encrypted." Cushmore's sentencing is set for March 2022.

5. Adoption Agency Manager Pleads Guilty to Uganda Bribery Scheme

On November 17, 2021, DOJ announced that Debra Parris had pleaded guilty in the Northern District of Ohio to conspiracy to violate the FCPA and to commit visa fraud in connection with a bribery scheme involving international adoptions. Parris, a program manager at an Ohio-based international adoption agency, allegedly schemed to bribe probation officers, court registrars, and High Court judges in Uganda to secure official acts that facilitated the adoption of Ugandan children.  According to DOJ, Dorah Mirembe, an alleged co-conspirator charged with, among other things, conspiring to violate the FCPA and to commit visa fraud, conspiring to commit money laundering, and substantive FCPA and money laundering violations, is at large. DOJ first announced the charges against Parris and Mirembe in August 2020. Another alleged co-conspirator, Robin Longoria, pleaded guilty in August 2019. As we noted at the time of Longoria's plea, international adoption has been a relatively frequent subject of FCPA opinion procedure releases (see, e.g., FCPA Op. Proc. Rel. 11-01 and 12-02), but the Longoria case was the first enforcement action involving this subject.

6. Son of Former Panamanian President Extradited from Guatemala to Face Bribery-Related Money Laundering Charges

On November 15, 2021 DOJ announced that Luis Enrique Martinelli Linares, a Panamanian and Italian citizen, had been extradited from Guatemala to the United States to face an indictment charging him and his brother, Ricardo Alberto Martinelli Linares, with money laundering offenses in connection with a bribery scheme involving a Brazilian construction company. DOJ had first announced money laundering charges against the brothers, as well as their arrests in Guatemala, in July 2020. On May 17, 2021, a Guatemalan court granted a U.S. request to extradite Luis, who was denied bail in the Eastern District of New York on November 23, 2021. The brothers are sons of former Panamanian president Ricardo Alberto Martinelli Berrocal, who governed Panama from 2009 to 2014 and may run for president again. (Former President Martinelli faced charges after leaving office for an illegal wiretapping scheme, charges he was recently absolved of by a Panamanian court.) According to DOJ, the Martinelli brothers conspired with others to launder approximately $28 million in bribe payments from the construction company to a government official in Panama, a close relative of the defendants, through the use of foreign bank accounts and shell companies.

7. DOJ Drops Majority of Bribery-Related Money Laundering Charges Against Extradited Colombian National

On November 1, 2021, a judge in the Southern District of Florida granted DOJ's motion to dismiss seven of eight money laundering charges against recently extradited defendant Alex Nain Saab Moran. Saab, who reportedly has close ties to Venezuelan President Nicolas Maduro, was extradited to the United States in October 2021 from the Republic of Cabo Verde (where he had been detained since June 2020) to face July 2019 charges related to his alleged efforts to launder the proceeds of a bribery scheme involving a November 2011 contract with the Venezuelan government to build low-income housing. In its motion to dismiss the charges, DOJ told the court that the United States had provided assurances to the Republic of Cabo Verde  that it would not "prosecute or punish [Saab] for more than a single Count of the Indictment, in order to comply with Cabo Verdean law regarding the maximum term of imprisonment." A status conference to decide the trial date is scheduled for early January 2022.

8. Former Citgo Official Sentenced for Role in Venezuelan Bribery Scheme

On November 10, 2021, Laymar Giosse Peña Torrealba, a former Citgo official, was sentenced in the Southern District of Texas to three years of probation following her guilty plea in 2019 to one count of conspiracy to launder money. Peña Torrealba admitted to accepting bribes from a logistics contractor in exchange for business with Citgo, a subsidiary of PDVSA. Peña Torrealba was also fined $332,000. According to DOJ, Peña Torrealba cooperated extensively with the investigation.

9. Swiss Financial Regulator Imposes Restrictions on Two Banks for Failure to Prevent Money Laundering

On November 18, 2021, the Swiss Financial Market Supervisory Authority (FINMA) announced restrictions against Banca Zarattini & Co. SA and CBH Compagnie Bancaire Helvétique SA, following enforcement proceedings opened in August 2019 and February 2020, respectively, into the banks' dealings with PDVSA. According to FINMA, the banks breached their obligations to combat money laundering and violated supervisory law when they failed to run sufficient economic background checks into business relationships and transactions with increased money-laundering risks and failed to maintain adequate documentation. Banca Zarattini's alleged misconduct spanned from 2014 to 2018, while CBH's alleged violations occurred between 2012 and 2020. FINMA's restrictions prohibit Banca Zarattini from accepting any new Venezuelan and politically exposed person clients, and require CBH to end all ongoing relationships with Venezuelan clients. FINMA announced it will carry out future checks at both banks to ensure that the measures are implemented effectively. FINMA reported that it has been in contact with over 30 Swiss banks in connection with alleged cases of corruption involving PDVSA. (For another example, see our February 2020 Top 10.)

10. Former Unaoil Executive Fined for Role in Iraq Bribery Scheme

On November 3, 2021, the UK Serious Fraud Office (SFO) announced that Stephen Whiteley, a former Iraq territory manager at Unaoil energy consultancy, had been ordered to pay £95,864 (approximately $130,880) in connection with an alleged conspiracy to bribe Iraqi officials to win a $55 million contract for his employer. In July 2020, Whiteley was found guilty of conspiracy to give corrupt payments and sentenced to three years in prison. (For more on the charges against Whiteley and his alleged co-conspirators, see our November 2017, December 2018, July 2019, and June 2021 Top 10s.)

Footnotes

1 Memorandum Opinion and Order, United States v. Daisy T. Rafoi-Bleuler, No. 4:17-cr-514, ECF No. 255 (S.D. Tex. Nov. 10, 2021).

2 Arraignment Plea, United States v. Frederick Cushmore Jr., No. 2:21-cr-455-RJC, ECF No. 17 (W.D. Pa. Nov. 17, 2021).